Hong Kong leads Asia lower; Tokyo gains after long holiday

Metallurgical Corp. of China stumbles in Hong Kong IPO

By

ChrisOliver

ColinNg

LeslieShaffer

HONG KONG (MarketWatch) -- Japanese shares made a solid showing in their resumption of trading after an extended holiday, while Hong Kong stocks closed Thursday's session lower -- reflecting a mixed performance across the region.

In Tokyo, the Nikkei 225 Average (1804610) ended 1.7% higher, supported by advances in other markets during a five-day holiday as well as gains in chip-related stocks. The Thursday session also marked the final day for investors to buy stocks ahead of a cutoff date that can affect dividend payments and other rights.

In Hong Kong, stocks came under pressure as a result of a disappointing debut for the city's biggest IPO this year. The Hang Seng Index (1804580) ended 2.5% lower.

"The local market has been ahead of fundaments for a number of months now," said Alex Tang, Hong Kong-based analyst with Core Pacific-Yamaichi. "The discrepancy between trading volume and price movement is bound to pressure stocks in the short term."

At late afternoon, Singapore's Straits Times Index was off 0.5%, Malaysia's KLCI benchmark dipped 0.2%, Thai stocks were off 0.5% and Indian stocks eased 0.8%.

Traders said that Thursday's decliners were tracking the performance of U.S. equities overnight, after the Federal Reserve held interest rates steady and highlighted signs of economic recovery but indicated it would slow the purchase of bonds, taken as signaling that interest rates could soon rise.

"People are a little bit concerned about the [Fed's] exit strategy," said Yoji Takeda, head of regional equities at RBC Investment Management Asia.

The Dow Jones Industrial Average lost 0.8% Wednesday, with selling coming late in the session on the heels of a policy statement by the Federal Open Market Committee indicating a rosier outlook for the largest global economy. See The Fed.

"The performance of the U.S. markets overnight didn't look good, and is likely to raise concern that U.S. markets may be very near their peaks," said Y.S. Rhoo at Hyundai Securities in Seoul.

Resource stocks drag on Asia indexes

Around the region, investors also took cues from a drop in base metals prices Wednesday.

Further dampening investor sentiment, Metallurgical Corp. of China (1618) struggled in its debut on the Hong Kong market, its shares ending at HK$5.61, or 11.5% below the price set on its initial public offering.

Conita Hung, head of equity markets at Delta Asia Financial, said the stock's Hong Kong IPO price translated to around 26 times forecasted 2009 earnings. "I think the IPO price was a bit pricey," said Hung, who expects the stock to trade between HK$5.30 and HK$6.00 in the near term.

Japanese stocks were supported by the chip sector, with investors cheered by upbeat comments that Paul Otellini, the chief executive of Intel Corp., made earlier in the week. He said he expects PC sales for the year to be "flat to slightly" higher. See related story.

A notable decliner, shares of Japan Airlines (9205) lost 15.8% on uncertainty over the carrier's efforts to restructure. After the market closed, President and Chief Executive Haruka Nishimatsu said the company has asked the Japanese government for public funds to boost its capital base.

Also lower, shares of Aiful (8515) plunged 23.9% after the consumer lender said it was preparing to apply for debt-reorganization procedures mediated by a third party. The company also said it now expects a group net loss of Y311 billion for the current fiscal year, a reversal from its previous forecast that had called for a Y8.12 billion profit.

Elsewhere, Singapore's Noble Group added 7.8% as it resumed trade after Tuesday's news that sovereign wealth fund China Investment Corp. bought a 15% stake in the company for $850 million. "We view CIC's investment positively as it cements Noble's presence in China, where tremendous growth potential exists, and paves the way for more investment opportunities," Nomura analysts said in a report.

Eye on the G20

In other regional markets, New Zealand's NZX-50 fell 0.5% and Philippine shares shed 0.2%. Indonesia's JSX composite was up 0.8%.

In foreign-exchange markets, the euro changed hands at $1.4753 against $1.4740 in late New York trading Wednesday, and at 133.61 Japanese yen, from 134.64 yen. The dollar stood at 90.56 yen, from 91.32 yen.

There was some caution ahead of the Group of 20 summit in Pittsburgh to be held Thursday and Friday, with investors watching for any comments by officials on foreign-exchange levels.

But Eurasia Group said it expects any impact from the summit to be limited. "With twenty-plus states, all with different domestic interests, and without an enforcement mechanism, the G20 is unlikely to agree to much beyond weakly worded agreements-in-principle," Eurasia analysts said.

Japanese government bonds edged higher, with the lead December futures contract rising 0.27 points to 138.82, while the 10-year cash bond yield fell 2.5 basis points to 1.315%.

Mitsubishi UFJ Securities strategist Naomi Hasegawa noted that U.S. Treasurys advanced during the Japanese five-day weekend, so "there may be some catch-up buying to do."

Spot gold was at $1,012.90 per troy ounce, up $4.70 from the New York close. "On balance, the FOMC rate decision and statement were gold-friendly, with one important caveat. The statement estimated that long-term inflation will remain subdued; a low-inflation climate is historically negative for gold prices," said HSBC analyst James Steel.

The November Nymex crude-oil futures contract was down 80 cents at $68.17 a barrel, extending its loss of nearly 4% on Wednesday on the heels of the Fed's policy statement.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.